September 30, 2024

China’s central bank has unveiled a vast monetary easing measure targeting the world’s second-
largest economy’s ailing property market and sluggish growth. They were reductions of short-
term interest rates, decreasing the required reserves ratio, declining the interest rates for loans for
a certain term, starting from mortgages, and infusing billions of dollars to increase the market
liquidity of stocks.
This release elicited significant effects in multiple markets in the following ways. Chinese
consumers make significant contributions to luxury brands owned by the companies like
Burberry Group, LVMH Moet Hennessy Louis Vuitton and Kering. While, it is still below 2021
level, Chinese luxury consumption remained close to one fifth of worldwide, said Bain & Co
Consumers also enjoyed stocks such as Alibaba (BABA), Pinduoduo (PDD), Baidu (BIDU)
which are in special roles in China’s internet economy.
Also expected to gain from this stimulus is any American brand most of whose sales come from
China such as Apple, Nike, and Lululemon Athletica.
Many ETFs known to hold Chinese shares, including the iShares MSCI China ETF (MCHI) and
the iShares China Large-Cap ETF (FXI), rose 8.6 per cent higher after the stimulus released due
to increased investor confidence. In their turn, analysts note that although steps made by the
China’s authorities indicate certain improvement, this improvement may be insufficient to
stabilize the country’s weak domestic demand. Goldman Sachs analysts also said that further
fiscal consolidation steps would, however, be needed to support sustainable growth pace.